Visionis IBM’s global conference for finance and risk professionals to help improve planning, budgeting and forecasting, identify and mitigate risk, and meet the demanding requirements of XBRL, IFRS, Basel II and Solvency II with greater confidence.

I talked to Mauboussin about his book, making data-driven decisions, some common pitfalls as decision makers, and his upcoming talk at Vision.

“What's very exciting is that in the last half dozen years, we've had a real influx of data, and we're now just learning how to tap that data for the benefit of better decision making,” said Mauboussin. “Now we can create a better intersection between value creation and making decisions.”

The problem however, according to Mauboussin, is that we still have the same cognitive makeup and the propensity to make common mistakes.

“We often think about our own decision making as being objective and fact based and rationale. And we tend to underestimate systematically how important the social context is for our decision making,” said Mauboussin.

To illustrate this point he told an interesting story from his book.

Researchers went into the wine section of a supermarket and set up French and German wines next to each other that were roughly matched in price and quality. Over a two week period they alternated playing distinctively French and distinctively German music to see if it would have any influence on purchase decisions.

Surprisingly, they found when French music played people bought French wine 77 percent of the time, and German wine 73 percent of the time when German music played. When asked if music affected their selections, the consumers unanimously said no.

“This basic experiment can be extrapolated to a lot of organizational settings where we think of ourselves as trying to be conscious and mindful as we make decisions. But indeed what is going on around us can be deeply influential to our decisions,” said Mauboussin.

So what do we do?

According to Mauboussin, integrate more data into quality decisions. However, there is still a tension between the intuitive, go by the seat of the pants experience group versus the analytically-minded group.

“Either extreme is not going to work but a blend between the two is right way,” said Mauboussin.

Read the rest of the interview with Michael Mauboussin on the Business Analytics Blog here.

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